$45 billion take-over deals are not the usual beat on this site. However, the buy-out offer for TXU, an enormous Texas power utility, by a consortium of private investors is more than just another story of billionaires being billionaires. There is actually some good news to report.
Some time ago TXU announced plans for 11 new coal-fired power plants in Texas. They were going to be new, but new in steel and concrete only. The technology was going to be old, which is to say, cheaper — since free market economies are not much interested in true costs. The CO2 released to the atmosphere by these plants would double TXU’s already high contribution, but heck, this cost is not on TXU’s balance sheet so release away.
Environmental Defense, a 500,000 member environmental advocacy organization, along with many others including mayors and other officials of Texas cities mounted a vociferous campaign to stop the plans. The stock price of TXU dropped over 20% because of the controversy.
The big surprise then, accompanying the proposed sale, is that the potential investors wanted to end this PR war and called up ED to say they were willing to cut back on the power plants. After weeks of negotiations a deal was struck: not 11 new plants, but only three. That is, if adhered to, a major victory. Fred Krupp, president of Environmental Defense has this to say:
As part of the sale agreement, Environmental Defense helped negotiate an aggressive environmental platform that will, among other things:
* Terminate plans for the construction of 8 of 11 coal-fired power plants TXU had hoped to build;
* Stop TXU’s plans to expand coal operations in other states;
* Endorse the U.S. Climate Action Partnership (USCAP) platform, including the call for a mandatory federal cap on carbon emissions; and
* Reduce the company’s carbon dioxide emissions to 1990 levels by 2020.
Besides the victories enumerated above we can take heart that ED and others are now considered players in the biggest arenas — where the truly momentous decisions must be made in the next decade. They are players because they assembled serious teams, got serious money and volunteers and raised the issues in ways that could not be ignored. Then they fielded negotiators able to compete with sharks of high finance.
It helped that the chief buy-out advisors to the group was Goldman Sachs, the enormous Investment Banking firm, which has had a strong position on reducing carbon emissions. Andrew Sorkin at the NY Times has a pretty thorough run-down on the unusual events.
Besides Environmental Defense, the National Resources Defense Council was in on the negotiations. They’re pretty happy, as well.
Is this the end of the story? Not by a long shot. You’ll see at the end of Sorkin’s article that some of city and municipal officials in on the fight may in fact continue to contest the three plants left on the board.
There are all sorts of other issues at work here, too. We can be sure that the new owners — if the deal goes through — got a great deal of what they wanted, much of which many readers here will want to scream about. It may well happen that hidden clauses pop up in the years ahead to make the good guys bang their heads on the wall. But for all that, let’s call it a victory, a leg to stand on, a flag to wave in the battles ahead — not the least of which is to get a core group of rich bastards to understand it’s about investing in the real world, not the fantasy one they’ve been living in since the beginning of the industrial age. It’s about their children and grandchildren too, and the world they will have, which won’t be much of one if reduced to gated communities, with over extended resource supply lines, defended by armies of mercenaries.
Congratulations, and keep the sentries alert.
